Consumption Trends: Biomass-Based Diesel | Episode 25

  May 04, 2021

Biomass-Based Diesel (BBD) has increased its share of the diesel fuel market from 0.5% volume in 2010 to 5.0% in 2018 and is projected to reach 10% by 2022. The widespread acceptance of BBD can be attributed to its broad compatibility with the U.S. transportation fuel infrastructure and positive environmental attributes. We spent time with Dr. Tristan Brown, Associate Professor of Energy Resource Economics at SUNY College of Environmental Science & Forestry to learn more about the role of BBD in the Climate Leadership and Community Protection Act. This legislation places New York state under a legal obligation to achieve a 100% net reduction of GHG by 2050, economy wide.

Transcript

Jeff Hove:
Welcome everybody to Carpool Chats. This is Jeff Hove, and we've got a great discussion going on today. We've got Tristan Brown with us, Tristan.

Tristan Brown:
Pleasure to be here.

Jeff Hove:
We're very glad to have you. Tristan is with ... he's an associate professor in New York at the State University of New York. And we're going to talk a little bit about what Tristan's been doing here. A lot of our discussions this year are going to continue to be about carbon intensity of fuels and different policies, whether we're talking light duty vehicle, fleet versus heavy duty, and how different policies are attacking that. Tristan, you did some work for us back, I think we published in March of 2020 on biomass based diesel.

Tristan Brown:
Correct.

Jeff Hove:
And that was a fantastic report, thank you very much for that.

Tristan Brown:
It was a lot of fun to write.

Jeff Hove:
Yeah. If anybody hasn't seen it already, please feel free to go to the website, and it's free for everybody to download there. And it really was, this is kind of a takeoff from that report in many ways, right? Where you took a deep dive into feedstock issues into demand and things of that nature on biodiesel and renewable diesel. So I think, moving forward this is going to be a very important discussion. So I was kind of hoping to hear a little bit more about where the State of New York is going.

Jeff Hove:
We're beginning to see what none of us really want to see, is that patchwork of policy across the United States. Most people in the industry would rather see a national standard or something like that. But that's not really the case right now. We've got a lot of different groups, whether you're in the Northeast and the Reggie States with some of those policies going on, we know in the Midwest is looking at Midwest low carbon fuel or clean fuels type standards, California and Oregon already kind of got their thing going on. I'm not sure what the heck Washington's doing, but anyway, they'll figure it out sooner or later.

Jeff Hove:
So all of that said, could you give us a little bit of background on where you see the State of New York going and what they're looking at doing, what their rollout might look like? What approach are they taking from a policy standpoint?

Tristan Brown:
In 2019 New York passed what's termed the Climate Leadership and Community Protection Act. And this was, it's really an all encompassing piece of climate legislation billed as one of the most ambitious policies to have been implemented in the US at the time, all the other States are starting to make similar adaptations if you will. But what it commits to is New York State is now legally obligated to achieve a 100% net reduction to greenhouse gas emissions by 2050. And what's most important is that's economy wide.

Tristan Brown:
So in the past we typically seen, for example, California's low carbon fuel standard has focused on the transportation sector. We frequently see renewable portfolio standards that focus on the power sector. This is all of the sectors in the State, every economic sector that ultimately has greenhouse gas emissions. And so on the one hand its job is a little easier than what's California done has done, because when California's low carbon fuel standard was implemented ...

Tristan Brown:
This was back when Tesla was kind of this fringe startup company. It was not the giant company that now all the major automakers are starting to emulate. Back then vehicle electrification was a tiny fraction of what we see today. So on the one hand, when New York says we're going to completely decarbonize our transportation sector, well, electric vehicles, light duty electrification, that's going to be much easier than it was for California 10 years ago.

Tristan Brown:
But on the other hand, we are talking about all the fuels that are used in the State. So on-road transportation, off-road transportation, industrial fuels, even aviation fuel, marine fuels, and New York being a Northeastern State continues to use quite a bit of heating oil as well, approximately 30% depending on the data that you're looking at of the households in the State run off the heating oil. So all of these fuels are going to have to be decarbonized. So that really sets the stage for what's going to occur.

Tristan Brown:
Now, what has not been determined yet is how that is going to be achieved. So we're actually going through the policy advisory process right now, I'm on one of the advisory panels for the industrial sector, and they have other economic sectors, transportation, power, et cetera. And we're in the process of making policy recommendations in terms of how to achieve that 100% net reduction of greenhouse gas emissions. And I think the next year is really going to determine what happens with that. So we talk about a low carbon fuel standard in California. I know that the transportation panel, for example, is considering a low carbon fuel standard or a clean fuel standard as a possible policy here in New York State. So there could be some similarities to what we've seen, but when it comes to decarbonizing these other economic sectors, it's very much uncharted territory in that regard.

Jeff Hove:
Okay. So, the discussion hasn't really even evolved yet to determine, is this going to be an incentive-based approach or a credit-based approach like the RFS or the LCFS? It sounds like it's going to be a number of different approaches in order to achieve such a big lift. Are there discussions on downstream incentives or for bringing in lower carbon fuels? Every program seems to have a carrot or a stick, or have you begun looking at some of those details yet from a policy standpoint?

Tristan Brown:
No, not in the sense of the finer details. What has been done is a roadmap exercise that has identified the types of decarbonisation measures that can be utilized. This was actually published last summer by the State. And while it doesn't go into, say, "These are the specific policies that will get us there," they have looked at more of the fuel side to say, "Okay, this is what will be available. This is what's available right now. This is what's available at 2030 according to our best projections," then all the way out through 2050.

Tristan Brown:
And that roadmap exercise has been very interesting because it does show that, when it comes to renewable fuels, that is going to have to play a very large role to this complete de-carbonization. One of the projections, if you will, that's contained in this roadmap study, is that up to a billion gallons of renewable distillates will be consumed in New York State every year, possibly as soon as 2030, and certainly by 2050.

Tristan Brown:
And on the one hand, we have seen that happen. California, if it's not at that point, it's very, very close to that point right now. But at the same time, New York State is essentially approaching this from zero miles per hour. It's just getting started when it comes to these renewable distillates. And so this would have to be a massive scale-out. And so when it comes to every sector, that's what it's really looking at is, "These are the fuels that we think will be available. Here's how much of them we're going to need." The next step is going to be crafting the policies that will get us to that point.

Jeff Hove:
I see. So, you're probably starting to get a sense ... Well, let me back up a second. So for your industrial sector, is it safe to assume that that includes heavy duty transportation? Is that kind of your niche?

Tristan Brown:
Yeah, that's kind of the ... I would say it's more of a crossover. That's going to be one of the issues that comes up the implementation process is the advisory panel so far is split into very specific sectors, but there's a great deal of overlap across the sectors. The industrial sector, for example, does use a substantial amount of fuel oil. That fuel oil is not going to be all that different from the heating oil that the building sector, that's another one of the panels uses, which is not all going to be all that different from the ULSD that the transportation sector uses.

Tristan Brown:
At the end of the day, they're all refined products that have a great deal in common. So there's a lot of overlap between that. So the industrial sectors looking at specifically what stationary sources are emitting, but there's a strong recognition that if you start effecting heavy duty transportation, that is going to have a direct impact on the industrial sector. And so we're starting to look at these cross sector, the overlap between the different sectors, and when it comes to the fuels, how that's going to affect different sectors, if you were to regulate or try to completely replace one of the fuels that is currently being used by them.

Jeff Hove:
Got it, got it. So there's going to be this enormous pull for renewable diesel, biodiesel. And again, it's going to be in competition, right? So one of the questions I always have are, as we have these basically competing policies from State to State, again, getting back to that patchwork and how we're already seeing that, where the west coast is really pulling a lot of the lowest carbon fuels into its market away from other markets because of basic economics. It makes sense to do that. Where do you see renewable diesel fitting in the policies that you're talking about right now in New York?

Tristan Brown:
Ultimately in my opinion, I don't see how these targets are going to be reached without a substantial amount of renewable diesel and biomass based diesel more broadly being utilized. And it really comes down to the fact that when we look at how easy it is to electrify different sectors they're not all on the same level. Light duty vehicles, easiest to electrify. And here in the State there is a growing assumption that by 2030, we are going to have mostly seen light duty vehicles electrified. So gasoline demand is probably going to be substantially reduced, perhaps even by 50% or more within the next decade. But when you look at the State of technology, heavy duty transportation is going to be one of the last areas to be electrified. When we think marine and especially aviation fuels, those are certainly going to be the last to be electrified.

Tristan Brown:
I'm not even sure we'll see those in my lifetime. And so that's where renewable distillates, whether that's renewable diesel or sustainable aviation fuel, those are going to be critical, because if we're going to completely decarbonize those sectors within the next 30 years, which is what New York State is now legally required to do, electricity is not there. Then we're going to have, to have low carbon fuels to fill in that gap. And so I think we're not necessarily going to see as much need for low carbon versions of gasoline, but we are going to see a very strong need for low carbon versions of the middle distillates that we're currently using.

Jeff Hove:
Yeah. And to take off from the report that you did for The Fuels Institute a while back where you really kind of got into the weeds on some of the feedstock demand, and then what's the potential here to displace that billion gallons of distillate that ... I mean, what I think I heard you say is that's basically the goal, is to displace a billion gallons of current ULSD or HO. Is that feasible? I mean, how does the State of New York develop that market? I mean, are the feedstocks going to be available, I guess is the bottom line question, and where are they going to come from?

Tristan Brown:
Yeah. That's a great question, because this is not the first time it's come up either. This is something I found in my report was that every few years we see projections coming out of different groups, saying that we have hit the maximum amount of biomass based diesel we can produce. And the world is producing all the feedstock it can, there cannot be any more growth unless you start talking about expansion of Palm in developing countries, which for environmental reasons we really don't want to see.

Tristan Brown:
So this is ... at one point it was 600 million gallons of production was a maximum we'd see, in the US, and then it was a billion gallons, and every few years it increases. Every time we think we've hit the maximum amount of production that feedstock can support, the community comes through, the scientific community comes through and the agricultural communities, and they find a new source.

Tristan Brown:
10 years ago, used cooking oil was not something any of us thought about. I actually had a student who was working for McDonald's as a manager when used cooking oil first started to be utilized to produce biomass based diesel. And she said, when she started the job used cooking oil was something they just kind of set out in the open outside, they'd wait for the trash to come pick it up, and it was waste product. They were just trying to get rid of it. By the time she left, they were having to lock it up, because it had become so incredibly valuable as a biomass based diesel feedstock, that people were actually stealing it.

Tristan Brown:
So this is something where, as we start to think we run out, we do see new feedstocks, whether it's used cooking oil or distillers corn oil, or increasingly animal tallow start to be utilized that permits us to produce more than we had thought possible. And certainly there are a number of feed stocks that we're not currently producing that could very well fill that gap in the next five to 10 years. Whether it's the ExxonMobil synthetic genomics joint venture, produce micro-algae, there are a great number of cover crops, oil seed, or otherwise that could potentially be used as well.

Tristan Brown:
So, yeah, I'm always hesitant to say, this is the maximum, we're not going to exceed that. That being said, pretty much all the biomass based diesel that is produced in the US today, and really the world is coming from lipids. Animal fats, vegetable oils, some combination thereof. And if we're really going to get beyond the type of trajectory in terms of demand that we have seen to date, we're going to have to start using other feedstocks, and talking about different types of biomass. And here in New York State what this roadmap from last summer that I was talking about predicts is that, yeah, there is going to be some used cooking oil, and some of these other waste lipids that are going to be utilized, but increasingly the State, if it's going to hit that billion gallon target, it is going to need to make use of a great deal of the woody biomass, whether that's dedicated energy crops or forest biomass, that the State is either producing or has the potential to produce.

Tristan Brown:
That's a unique issue, because from a feedstock side, that feedstock is readily available. We're certainly very confident in that, but we're not seeing much being done at least at a commercial scale to convert that to renewable diesel or sustainable aviation fuel. And so I think that's really where the major change is going to have to occur from a technological standpoint is to take lignocellulosic biomass, crops that we're not eating and converting that into renewable diesel to hit that billion gallon target.

Jeff Hove:
Yeah. Yeah. And it seems like a lot of times that we get a little bit hindered by policies, such as the RFS where they're kind of slow to develop or take in new feedstocks into pathway assessments and stuff. It's fairly restrictive in that sense. And my guess is we're going to see some loosening up of that for the post 2022 RFS or wherever direction they go, whether it's LCFS or modified RFS.

Jeff Hove:
Regarding ... and this is kind of a slightly off topic question. I hate to dump this on you, but I was curious, so renewable diesel is a hydro processed isomerized material, so hydrogen from natural gas is a big part of that equation. Are these natural gas disruptions going to pose any problems? I think the East and Northeast is pretty heavy on natural gas. So, I mean, I don't see it as a big issue, but what we've seen down in Texas with some of these disruptions and stuff, natural gas prices getting blown through the roof, any connection there? Any other loose ends that should be considered when we're talking about renewable diesel and in that process?

Tristan Brown:
Yeah. This is actually a very important point that you bring up, not necessarily for the weather conditions. I think is currently about negative five degrees where I'm at windchill. So we're very used to the cold weather, everything's winterized in that regard, but especially if you start thinking the Northeast, if we define that as the Northern Pennsylvania border on up, so New York, New Hampshire, Maine, Vermont, those States, there has been a growing push to get rid of the existing natural gas infrastructure. And even more than that, to stop building out natural gas infrastructure.

Tristan Brown:
We have seen some supply disruptions actually in the State in the last few years, not because of weather, but because the infrastructure is not being permitted to be built. There was actually a regulatory case a couple of years ago here in this State where the regulators, for the first time, at least in New York, and probably one of the first times in the US said that a natural gas pipeline could not be built, not because of any potential water pollution or anything like that, but because it would be connected to a natural gas fired power plant and would contribute to climate change via the resulting greenhouse gas emissions.

Tristan Brown:
So as the State moves further and further away from natural gas infrastructure, to that point, when we talk about renewable diesel, this is something where almost all the renewable diesel production capacity that exists in the US or has been announced is being built west of the Mississippi. It's being built in response to California's low carbon fuel standard. So if new York's going to achieve a billion gallons of renewable distillates by 2030, there's going to have to be a pretty vast and rapid build out of production capacity east of the Mississippi river, and especially in the Northeast.

Tristan Brown:
Well, if you don't have access to that natural gas, that's going to force you to start looking at different alternatives. Now, there's a number of different ones out there. We have a lot of nuclear capacity, especially in the Northern part of the State, that is not very profitable right now, is looking for ways to continue producing electricity. And that would be one option is New York has great amounts of water. There's no shortage of water, so you could use some sort of electrolysis procedure, produce that hydrogen. Number of different options. Again, lots of biomass, you could produce green hydrogen, but you would have to find new ways that we are not currently seeing used by the renewable diesel sector in the US to produce that hydrogen.

Jeff Hove:
Yeah. Yeah. And to your previous point too, I mean, it seems like every year technology is finding those answers. So it's pretty exciting time.

Tristan Brown:
Very exciting.

Jeff Hove:
Tremendous amount of smart people out there that can get us over some of those hurdles. I do know at The Fuels Institute, coming up here shortly, we're going to be convening some more low carbon fuel standard initiatives or industry groups to discuss these types of specific policies and some of these hurdles and to make sure that we can avoid any type of unintended consequences. Right. It's kind of our mantra here. So that's very helpful.

Jeff Hove:
Tristan, I thank you very much for your time. I'm sure we're going to be talking some more again here in the near future on this topic. And again, thank you very much. I appreciate it.

Tristan Brown:
Well, I appreciate the opportunity to speak to you. This has been a lot of fun.

Jeff Hove:
All right. All right. Well, that's it for this episode of Carpools Chats, and hopefully everybody can join us for the next episode. Again, thank you, Mr. Brown, and thanks for everybody for viewing.